Spieckerman Speaks on Media

Saturday, April 13, 2013

How Stations Can Kill Aereo And AutoHop

Broadcasters have an alternative to converting over-the-air networks to cable channels to thwart Barry Diller's Aereo and Charlie Ergen's AutoHop Dish DVR: the "Dual Stream Strategy." Each TV station would feed a new, modified visual format of programming to their transmitters for OTA reception. This would consist of a station’s programming lineup in a reduced-size video window, surrounded by continuous weather, news and community information graphics and visual ads. The second stream would consist of the core programming full-screen, just as it is now, for MVPDs with retrans deals.

By Lee Spieckerman

TVNewsCheck, April 12, 2013 8:19 AM EDT

TV stations and networks, already under siege from a plethora of online video offerings and new competitors like Netflix, are now facing a fusillade from Barry Diller and Charlie Ergen.

Diller-backed Aereo picks up TV station signals off-air and streams them to subscribers via the Web, without stations’ permission. Multichannel video programming distributors (MVPDs) like Comcast, Time Warner, DirecTV, Dish, Verizon FiOS and AT&T UVerse have retransmission agreements with TV stations that usually involve paying the stations to carry their signals. That retrans revenue stream has become a crucial supplement to advertising revenue.

Meanwhile, Ergen-controlled Dish has started offering a feature called AutoHop that automatically strips all TV ads from programs recorded on Dish DVRs. So far, the courts are doing nothing to stop Diller’s and Ergen’s attacks on the television industry and there are indications that the two pirates are in cahoots.

Dish just announced that it’s raising $2.3 billion to buy wireless spectrum. If Aereo isn’t stopped by the courts, Dish could harness that spectrum to send streams of local TV stations picked up by Aereo to Dish subscribers, enabling Dish to avoid having to make retransmission deals with broadcasters. That would save Dish — and cost the TV industry — billions.

Dish is already being sued by the networks to stop AutoHop. The networks claim that Dish doesn’t have the authority to tamper with ads from DVR replays of broadcasts.

CBS is seeking to have its retransmission agreement with Dish vitiated, on the grounds that Dish deliberately concealed its plans to launch AutoHop during their retrans negotiations. Fox, having been denied a preliminary injunction against AutoHop, has appealed to the Ninth Circuit.

Given the inherent vicissitudes of the legal system — a risk compounded by the incompetent jurisprudence on Aereo and AutoHop to date — and Charlie Ergen’s history of scorched-earth, ego-driven litigation, it would be foolish for broadcasters to leave their destiny in the hands of the courts.

So it’s not surprising that both News Corp. COO Chase Carey and Univision Chairman Haim Saban announced this week that their broadcast networks are prepared to take their signals off-air and convert their networks into pay channels, available only through MVPDs.

As MVPD-only services, television stations would be able to protect their intellectual property from Aereo’s off-air pilferage and, perhaps, more easily restrict Dish’s ability to excise their advertising. And TV stations might garner more in license fees from MVPDs than they currently receive from them in retransmission fees.

But ending over-the-air (OTA) service would be the nuclear option for TV broadcasters.

It would cut off service to viewers who can’t afford MVPD subscriptions — reducing ratings and creating a PR nightmare; end the cost-saving compulsory license for programming, which only applies to OTA broadcasts; diminish broadcasters’ leverage in carriage negotiations with MVPDs; and likely result in government confiscation of most or all of TV stations’ valuable OTA spectrum.

There is an alternative strategy broadcasters can execute much more quickly and easily with dramatically less downside risk: the “Dual Stream Strategy.”

Most TV stations already have the ability to send one programming stream to their transmitter for OTA reception and a totally separate programming stream, via fiber, to MVPDs.

Under the Dual Stream Strategy, stations would fully exploit the power of this capability.

Each TV station would feed a new, modified visual format of programming to their transmitters for OTA reception. This OTA Feed (OTAF), would consist of a station’s programming lineup in a reduced-size video window, surrounded by continuous weather, news and community information graphics and visual ads. Also included would be a graphic informing viewers that they can get the station’s programming, without the added visual elements, from their cable and satellite provider and the station’s mobile service.

Here is a mock-up of what the OTAF might look like:

The second stream would consist of the core programming full-screen, just as it is now. This Exclusive Clean Feed (ECF) would be provided only to MVPDs that have retransmission agreements with the stations in good standing (in other words, not including Dish with AutoHop). As noted above, the ECF would also be available through stations’ mobile phone/tablet services such as Dyle and Mobile500 Alliance.

Adding the layers of important, local, free visual content to OTA broadcasts of regular programming would in no way debase a TV station’s service to its community. To the contrary, it would be a significant enhancement to many OTA viewers who can’t afford cable or satellite (and in some cases, Web access) and are thus deprived of 24-hour news and weather channels.

This Dual Stream Strategy would annihilate Aereo and decimate Dish AutoHop by relegating their subscribers to a screen crowded with unwanted visual content and a shrunken programming window.

And, of course, the continuous on-screen ads in the OTAF would be AutoHop-proof.

In addition to fortifying broadcasters’ franchises, the ECF would raise the value of station content to MVPDs by driving new subscriptions from viewers who now get all their TV OTA. It would insulate the MVPDs from Aereo and emerging Web-based and over-the-top video services while accelerating uptake of TV stations’ mobile video services.

Comcast would seem particularly well positioned to execute the Dual Stream Strategy, as it has NBC network owned-and-operated stations in five major markets where its cable MSO is the primary MVPD: Chicago, Philadelphia, San Francisco, Washington and Miami. Most have a very low percentage of OTA-only households.

The Dual Stream Strategy might require stations to modify some network, syndication, sports rights and advertiser contracts — but far less than would becoming an MVPD-only service, which would eliminate the stations’ compulsory license. Because the core programming content of both streams fed by TV stations would be identical, that compulsory license and the MVPD broadcast retransmission rubric would remain intact.

And every participant in the video value chain — whether an MVPD, a studio, a sports league or an advertiser — has a huge incentive to cooperate with broadcasters. All have a common interest in shooting down Aereo before it gains more altitude and in eviscerating Ergen’s AutoHop.

Dish would undoubtedly claim that by forcing Dish viewers to settle for the OTAF, TV stations would be violating their Dish retransmission agreements. But, of course, broadcasters are already claiming that Dish’s AutoHop violates those deals.

So, broadcasters can throw Charlie Ergen’s four favorite words right back at him: “See you in court.”

After several brutal years, local television is finally recovering. Local TV journalism, boosted mightily by MVPD retrans revenue, is experiencing a renaissance. Broadcast television undergirds the U.S. pay television and content creation industries, as well as professional and college sports.

Aereo and Dish apparently have no compunction about collapsing that exquisite, uniquely American media ecosystem — one that has brought our citizens the most localized television service, and the widest choice of affordable video content, on the planet.

By implementing the Dual Stream Strategy, broadcasters can vanquish Ergen, Diller and fellow intellectual property plunderers without ceding any of their audience, revenue or spectrum.

About Me

CEO of a company launching a unique, localized, young-skewing cable TV network, Lee is a Fox News commentator, sought after speaker and op-ed contributor on media and public policy issues. Lee has served as a strategic consultant to TV stations, networks, politicians and TiVo Inc. He was founder and president of LIN Productions/executive producer of Texas Rangers Baseball television, where he oversaw what were widely considered the best regional baseball telecasts in the U.S.—including America’s first high definition pro sports telecast in 1998. The firm also created award-winning content and graphics for clients across the U.S. Previously, Lee was a corporate executive of parent LIN TV Corp where he simultaneously oversaw operations for flagship station KXAS-TV in Dallas; his team took the station from last place to number one in key newscast demographic ratings—the most dramatic major market news ratings turnaround of the ‘90s. In 1979, Lee was the youngest staffer on the John Connally Presidential campaign in Washington, DC where he worked with then-consultant Roger Ailes and press secretary Jim Brady.
Lee is active in non-profit organizations focused on foster children.